Second Annual Digital IQ Index of Luxury Brands Released

NEW YORK, United States —Last yearBoF reported on the first ever ranking of luxury brands' digital competence, and today the second ranking, published by New York-based LuxuryLab, was released first to a small number of global media outlets, including BoF.

The adoption of digital media has been explosive. Longtime readers from the very beginnings of BoF may recall our first ever post on Fashion 2.0 back in April 2007 when CEOs, Creative Directors and Managing Directors insisted to me that they would never use such tools as Facebook to engage their fans and customers. How things have changed in three short years!

According to Scott Galloway, founder of Luxury Lab, the "combination of the economic crisis, the emergence of a more digitally native Gen Y consumer, and several brands getting huge ROI — sales and press — due to digital leadership, inspired a massive investment in both human and financial capital in digital in 2010."

Fashion and leather goods brands dominate the top 10 and have seen the most progress. The 16 fashion and leather goods brands ranked in both 2009 and 2010 increased their Digital IQ by by an average of 24 points. Watches and jewellery companies did not fare as well, on average losing 9 points, with Rolex, Cartier and Chopard falling more than two IQ classes.

Skyrocketing to the very top of the heap of the 72 luxury brands ranked is Coach, which scored "an increase in Digital IQ of 63 points, jumping from the middle of the pack last year to claim the top spot," this year. Also scoring high were Ralph Lauren, Louis Vuitton, Gucci, Burberry and Dolce & Gabbana, all deemed as 'Genius' by the ranking, which assesses brand websites, digital marketing, social media and mobile presence.

Other fashion brands are lagging. Says Galloway, they "are sitting on their hands...hoping this whole 'internet' thing will go away." Ermenegildo Zegna, Bally, Balenciaga, Chloe, Versace and Alexander McQueen are all ranked as 'Challenged', while Dunhill, Catherine Malandrino, Ferragamo, Zac Posen, Tods and Manolo Blahnik are ranked as 'Feeble.'

The Digital IQ index has done an excellent job of drawing more attention to the digital revolution in luxury. I do, however, have a few gripes with the methodology and some of the rankings. Is Chanel, which has absolutely no e-commerce, really digitally 'Gifted'? Even if they do have over 1 million fans on Facebook, e-commerce should form an essential part of every luxury brand's business model.

That said, Facebook is certainly an essential part of a genius digital media strategy. According to the survey, 90 percent of luxury brands in the survey are present on Facebook, up from 79 percent in 2009, and the percentage of traffic luxury brands are receiving from Facebook has more than doubled in last 12 months, growing from 3.4 percent to 7.1 percent. But just having a Facebook presence isn't enough. Now, it is how these brands use their Facebook presence that will really count the most. For example, the report concludes that brands which use social sharing tools — for instance, the Facebook "like" feature on their site — registered annual traffic growth of 42 percent vs. 18 percent for brands that did not.

On the other hand, I don't think every brand needs to have a Twitter account or YouTube page. The Twitter presence of luxury fashion brands has jumped from 17 to 48 percent, with an overall growth of Twitter followers of almost 1,500 percent. YouTube presence has also skyrocketed from 26 to 55 percent. However, despite these increases, the report says that traffic from Twitter and YouTube has actually decreased over the past 12 months.

Should brands really be penalised if they have made the strategic decision to hold off on certain social media tools like Twitter? The truly genius brands are those that are developing a digital media strategy that is embedded in their business strategy, and taking on specific digital initiatives that help them to get there.

If you'd like to learn more about the Digital IQ Index, join me in New York on 5 November 2010 where I will be participating in Luxury Lab's Innovation Forum, billed as the largest gathering of prestige executives in North America, where the results will be presented in further detail. Readers of The Business of Fashion are entitled to a 20 percent discount if they use this link.